All posts tagged ASFA

I recently took part in a panel discussion on Peter Switzer’s Money Talks program on Sky Business around end of year tax planning. you can view the 20 minute show below for for some tips from all the panel. What was clear from the audience questions after the show is that many people just don’t know the strategies available to them.

But its now 5 days before the end of the financial year and many people may think it is too late! But there are still strategies you can still out in place.

1.Think first. First tip is to think carefully on each strategy before implementing any of them. review the eligibility criteria and your own personal circumstances.

2. Review Your Concessional Contributions – $25K this year if under 65 and then work test applies for 65+.

Maximise contributions up to concessional contribution cap but do not exceed your Concession Limit. The sting has been taken out of Excess contributions tax but you don’t need additional paperwork to sort out the problem. So check employer contributions on normal pay and bonuses, salary sacrifice and premiums for insurance in super as they may all be included in the limit. This year for the first time for employed people, you can still top up directly to your Superfund or SMSF without having to go through your employer and salary sacrifice. Work out you available cap and make a Personal contribution now!

3. Review your Non-Concessional Contributions

Have you considered making non-concessional contributions to move investments in to super and out of your personal, company or trust name. Maybe you have proceeds from and inheritance or sale of a property sitting in cash. As shares and cash have increased in value you may find that personal tax provisions are increasing and moving some assets to super may help control your tax bill. Are you nearing 65? then consider your contribution timing strategy to take advantage of the “bring forward” provisions before turning age 65 to contribute up to the $300,000.

4. Co-Contribution

Check your eligibility for the co-contribution and if you are eligible take advantage. You can get up to $500 co-contribution from the government so it is not as attractive as previously but it is free money – grab it if you are eligible. Check here for details

To calculate the super co-contribution you could be eligible to receive based on your income and personal super contributions, use the Super co-contribution calculator.

5. Spouse Contribution

People are eligible to claim the maximum tax offset for the 2017-18 $540 if:

you contribute to the eligible super fund of your spouse, whether married or de-facto, and

your spouse’s income is $37,000 or less.

The tax offset amount will gradually reduce for income above this amount and completely phases out when your spouse’s income reaches $40,000.

6. Over 65? Do you meet the work test? (The 40 hours in any 30 days rule)

You should review your ability to make contributions as if you if you have reached age 65 you must pass the work test of 40 hours in any 30 day period during the financial year, in order to continue to make contributions to super. Check out ATO superannuation contribution guidance

7. Check any payments you may have made on behalf of the fund.
It is important that you check for amounts that may form a superannuation contribution in accordance with TR 2010/1 (ask your advisor), such as expenses paid for on behalf of the fund, debt forgiveness or in-specie contributions, insurance premiums for cover via super paid from outside the fund.

8. Notice of intent to claim a deduction for contributions
If you are planning on claiming a tax deduction for personal concessional contributions you must have a valid ‘notice of intent to claim or vary a deduction’ (NAT 71121). If you intend to start a pension this notice must be made before you commence the pension. Many like to start pension in June and avoid having to take a minimum pension but make sure you have claimed your tax deduction first.

9. Contributions Splitting
Consider splitting contributions with your spouse, especially if:
• your family has one main income earner with a substantially higher balance or
• if there is a n age difference where you can get funds into pension phase earlier or
• If you can improve your eligibility for concession cards or pension by retaining funds in superannuation in younger spouse’s name.
This is a simple no-cost strategy I recommend everyone look at especially with the Government moving on limiting the tax free balance on accounts. See my blog about this strategy here.

10. Off Market Share Transfers (selling shares from your own name to your fund)
If you want to move any personal shareholdings into super you should act early. The contract is valid once the broker receives a fully valid transfer form not before. It takes about 4 days to implement this from the brokers end so Tuesday 26th would be the cut off day for the forms to be received by your broker. YOU CAN DO IT!

11. Pension Payments
If you are in pension phase, ensure the minimum pension has been taken. For transition to retirement pensions, ensure you have not taken more than 10% of your opening account balance this financial year.

The following table shows the minimum percentage factor (indicative only) for each age group.
Age Minimum % withdrawal (in all other cases)
Under 65 4%
65-74 5%
75-79 6%
80-84 7%
85-89 9%
90-94 11%
95 or more 14%

Sacrificial Lamb

Think about having a sacrificial lamb, a second lower value pension that can sacrificed if minimum not taken. In this way if you pay only a small amount less than the minimum you only have to lose the smaller pensions concession rather than the concession on your full balance. When combined with the ATO relief discussed in the following article “What-happens-if-i-don’t-take-the-minimum-pension” you will have a buffer for mistakes.

Before reading the following:Be careful not to reset a pension that has been grandfathered under the new deeming of pension rules that came in on Jan 1st 2015 without getting advice.

12. Reversionary Pension is often the preferred option to pass funds to a spouse or dependent child.
You should review your pension documentation and check if you have nominated a reversionary pension. If not, consider your family situation and options to have a reversionary pension. This is especially important with blended families and children from previous marriages that may contest your current spouse’s rights to your assets. Also consider reversionary pensions for dependent disabled children. the reversionary pension may become more important with the application of the proposed budget measure on $1.6m Transfer limit to pension phase. If funds already in pension and reverting to another person then the beneficiary has 12 months to implement strategies to maximise how much they can retain in the superannuation system.

13. Review Capital Gains Tax Position of each investment

If you have been affected by the changes in the rules on taxation of TTR Pensions and the implementation of the $1.6m Transfer Balance Cap then you should be considering the CGT relief that may be available to your fund.

In accumulation phase review any capital gains made during the year and over the term you have held the asset and consider disposing of investments with unrealised losses to offset the gains made.

If in pension phase then consider triggering some capital gains regularly to avoid building up an unrealised gain that may be at risk to government changes in legislation like those imposed in 2017/18

14. Review and Update the Investment Strategy not forgetting to include Insurance of Members

Review your investment strategy and ensure all investments have been made in accordance with it, and the SMSF trust deed. Also, make sure your investment strategy has been updated to include consideration of insurances for members. See my article of this subject here. Don’t know what to do…..call us.

15. Collate and Document records of all asset movements and decisions

Ensure all the funds activities have been appropriately documented with minutes, and that all copies of all statements and schedules are on file for your accountant/administrator and auditor.

16. Double Dipping! June Contributions Deductible this year but can be allocated across 2 years.

For those who may have a large taxable income this year (large bonus or property sale) and are expecting a lower taxable next year you should consider a contribution allocation strategy to maximise deductions for the current financial year. This strategy is also known as a “Contributions Reserving” strategy but the ATO are not fans of Reserves so best to avoid that wording! Just call is an Allocated Contributions Holding Account.

17. Market Valuations – Now required annually

Regulations now require assets to be valued at market value each year, ensure that you have re-valued assets such as property and collectibles. Here is my article on valuations of SMSF investments in Private Trusts and Private Companies. For more information refer to ATO’s publication Valuation guidelines for SMSFs.

18. In-House Assets

If your fund has any investments in in-house assets you must make sure that at all times the market value of these investments is less than 5% of the value of the fund. Do not take this rule lightly as the new SMSF penalty powers will make it easier for the ATO to apply administrative penalties (fines) for smaller misdemeanors ranging from $820 to $10,200 per breach.

20. Do you need to update to a Corporate Trustee

21. Check the ownership details of all SMSF Investments

Make sure the assets of the fund are held in the name of the trustees on behalf of the fund and that means all of them. Check carefully any online accounts you may have set up without checking the exact ownership details. You have to ensure all SMSF assets are kept separate from your other assets.

22. Review Estate Planning and Loss of Mental Capacity Strategies.

Review any Binding Death Benefit Nominations (BDBN) to ensure they are valid (check the wording matches that required by the Trust Deed) and still in accordance with your wishes. Also ensure you have appropriate Enduring Power of Attorney’s (EPOA) in place allow someone to step in to your place as Trustee in the event of illness, mental incapacity or death. Do you know what your Deed says on the subject? Did you know you cannot leave money to Step-Children via a BDBN if their birth-parent has pre-deceased you?

23. Review any SMSF Loans

Have you provided special terms (low or no interest rates , capitalisation of interest etc.) on a related party loan? Then you need to review your loan agreement and get advice to see if you need to amend your loan. Have you made all the payments on your internal or third-party loans, have you looked at options on prepaying interest or fixing the rates while low. Have you made sure all payments in regards to Limited Recourse Borrowing Arrangements (LRBA) for the year were made through the SMSF Trustee? If you bought a property using borrowing, has the Holding Trust been stamped by your state’s Office of State Revenue. Please review my blog on the ATO’s Safe Harbour rules for Related Party Loans here

24. Valuations for EVERYTHING

Not just for property, any unlisted investment needs to have a market valuation for 30 June. If you need assistance on how to value unlisted or unusual assets, including what evidence you’re going to need to keep the SMSF auditors happy, then contact us.

25. Collectibles

Play by the new rules that come into place on the 1st of July 2016 or get them out of your SMSF. More on these rules and what you must do in a good blog from SuperFund Partners here.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

I wrote an article a few years ago for MYOB’s small business blog called How much do I need to retire at 60? that certainly caused some heated debate and has been viewed over 425,000 times. The comments we got on that article were amazing and eye-opening to see how people’s vision of a “budget” and “comfortable lifestyle” is so different depending on their personal circumstances.

Some of the figures used for sample retirement budgets have been updated so I thought I would provide those figures as guidance for people facing the retirement funding conundrum and not sure where to start. I have also included figures more specific to the average SMSF member and those who want to have a much more than just “comfortable” lifestyle

The latest figures released by the Association of Superannuation Funds of Australia ASFA Retirement Standard benchmarks the annual budget needed by Australians to fund either a ‘comfortable’ or ‘modest’ standard of living in retirement.

Budgets for various households and living standards for those aged around 65
(March quarter 2018, national)

Modest lifestyle

Comfortable lifestyle

Single

Couple

Single

Couple

Total per year

$27,368

$39,353

$42,764

$60,264

Budgets for various households and living standards for those aged around 85
(March quarter 2018, national)

Modest lifestyle

Comfortable lifestyle

Single

Couple

Single

Couple

Total per year

$25,841

$36,897

$40,636

$56,295

Source ASFA Retirement Standard. The figures in each case assume that the retiree(s) own their own home and relate to expenditure by the household. This can be greater than household income after income tax where there is a drawdown on capital over the period of retirement. Single calculations are based on female figures. All calculations are weekly, unless otherwise stated.

The figures in each case assume that the retiree(s) own their own home and relate to expenditure by the household. This can be greater than household income after income tax where there is a drawdown on capital over the period of retirement. Single calculations are based on female figures. All calculations are weekly, unless otherwise stated.

As you can see from the figures if you are looking at a ‘comfortable’ retirement at age 65-67 you need to consider a budget of $60,264 for a couple or $42,764 for a single person household.

In my previous article I talked about retiring at age 60 but as most people will be looking more likely at 65 as their target, I wanted to clarify what I believe you need to fund such a retirement. In my opinion a couple would need a combined superannuation and non-super investment assets balance of around $760,000 minimum and a single individual would need a balance of around $560,000. This at odds with ASFA who have increased their requirement by a whopping $130,000 but still have lower figures than mine as they believe you only need $640,000 for a couple or $545,000 as a single person.

My figures are based on No Centrelink Support. I am happy to accept ASFA are correct if you take into account some age pension but I find that many clients do not qualify for this because of non-income producing assets like holiday homes, caravans boats etc reducing their pension entitlements. Also there is an inherent risk that the now reduced Asset and Income Test limits may be reduced further in the search for more Government Budget Savings.

SMSF Members save more for a better lifestyle

So let’s get take it for granted that an SMSF member wants a bit better than just a Comfortable lifestyle. My friends at Accurium who I use to do Retirement Healthchecks for my clients came up with these figures for those looking for a better lifestyle and having at least 50% chance of sustaining it for their life expectancy. This assumes all you capital will be used in your lifetime. If you want more detail and options on having capital to pass on to your children then visit Accurium’s website to access their full report.

Spend

Level of savings needed

ASFA Comfortable ($60,000 p.a.)

$580,000

SMSF typical spend ($80,000 p.a.)

$1,100,000

SMSF aspirational spend ($100,000 p.a.)

$1,600,000

Source: Accurium – Retirement Insights Vol 7

So have a look below at what the ASFA Retirement Standard includes and then add in your own preferences to find out your ideal budget and capital requirement.

The Standard includes the cost of things such as health, communication, clothing, travel and household goods.

Comfortable lifestyle

Modest lifestyle

Age Pension

Single

$42,764 a year

$27,368 a year

$21,222 a year *

Couple

$60,254 a year

$39,353 a year

$31,995 a year *

Replace kitchen and bathroom over 20 years

No budget for home improvements. Can do repairs, but can’t replace kitchen or bathroom

No budget to fix home problems like a leaky roof

Better quality and larger number of household items and appliances and higher cost hairdressing

One leisure activity infrequently, some trips to the cinema or the like

Only taking part in no cost or very low cost leisure activities. Rare trips to the cinema

Figures from March Quarter 2018.

Most people I see in my day-to-day work advising on retirement planning have a “sugar coated view” of how they want to spend their time in retirement. Many have hobbies or interests that cost very little but others who like international travel or partaking in expensive social lifestyles of hobbies often under-estimate the costs.

Another worrying trend is people borrowing in their 50’s to fund lifestyle for fear of missing out or to keep up with the Jones! Others are helping children with home deposits and losing the vital compounding interest on their savings. Many tell me they believe they can live on the Government Age Pension in retirement. Well if you can’t manage on your current wage now without borrowing then you are in for a big shock if you plan to rely on the meagre Age Pension.

I see one industry commentator saying that the savings required to live a modest lifestyle in retirement only requires a small amount of retirement savings in addition to the age pension, however that sort of budget leaves you very vulnerable to food and utility price inflation as people will have seen with rising vegetable and electricity pricing in the last few years.

When you look at these estimates of the amount capital or assets you need to achieve the lifestyle you want in retirement, it’s still important to remember that most of these work on the average life expectancy. If your family has a history of longevity or early death, then you need to make allowances accordingly.

The bottom line: It’s never too early and hopeful not too late to start planning. So if you want to see where you stand at present based on your current savings and contributions to super, then use the Retirement Planner on the ASIC’s free Money Smart website.

Once you work out you target you should consider seeing a Financial Planner to see what strategies are available to you to boost your savings such as using a Transition to Retirement Pension and Salary Sacrifice strategy to save on personal and superannuation tax and build your nest egg.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

Self-funded retirees have felt like punching bags for the last few years with hit after hit chipping away at their ability to fend for themselves within the rules they had relied upon in making their savings plans over the last 30 years. Combine the changing of goal posts with low interest rates and blue-chip underperformance from the banks, telcos and utilities and they are not to be blamed for thinking a hex had been put on them.

So an SMSF friendly budget is the welcome news coming out of the 2018-19 Federal Budget. With many of us SMSF Specialists and you the SMSF members still working through the wide-reaching and complex superannuation changes which took effect from 1 July 2017, this Federal Budget will provide much needed stability while looking to reduce costs for SMSFs and prove additional flexibility.

The key changes proposed for SMSFs and superannuation are:

Three-yearly audit cycle for some self-managed superannuation funds.

The Government will change the annual SMSF audit requirement to a three yearly requirement for SMSFs with a history of good record keeping and compliance. The measure will start on 1 July 2019 for SMSF trustees that have a history of three consecutive years of clear audit reports and that have lodged the fund’s annual returns in a timely manner.

One concern I have is if trustees make a mistake in year 1 that is not discovered until year 3, will they face 3 years interest charges on the penalties.

Expanding the SMSF member limit from four to six

As already announced, the Federal Government confirmed its decision to expand the number of members allowed in an SMSF from four to six. Expanding the definition of an SMSF to a fund with a maximum of six members will provide greater flexibility in how funds can be structured.

Whilst there are some concerns over making decisions I like this move where as mum and dad in their later years want to reduce their involvement but they want help rather with the fund rather than moving to separate retail funds. It may help prevent elder Financial abuse where instead of one child assuming control of the SMSF, more of the family could be involved. Temptation and inheritance impatience is always there for one person but add a few others in to the decision making and the risk of financial abuse reduces considerably.

Also 6 members of a family small business allows for later drawdown from the parents accounts and recontribution for younger family members to retain business real property in the fund after death of the older generation.

Note; you will need to ensure your trust deed allows more than 4 members and it most likely won’t so you will need to update the trust deed first before accepting new members. READ THE DEED

Over 65, 1 additional year Work test exemption

The Government will provide more time for Australians aged 65 to 74 to boost their retirement savings, by introducing an exemption from the superannuation work test.This exemption will apply where an individual’s total superannuation balance is below $300,000 and will permit voluntary superannuation contributions in the first year that they do not meet the work test requirements.

This is good but limited in its scope as more and More people have reached the $300k level because of Super Guarantee Contributions for most since 1992 or before for some. But it is a female friendly move as they are most likely to have lower balances

Life insurance cover in super to be opt-in for individuals under 25 years of age.

The Government will legislate that life insurance cover in superannuation will be opt-in for those individuals under 25 years of age or with account balances under $6000 to ensure that unnecessary fees do not erode smaller balances.

Life insurance cover will also cease where no contributions have been made for a period of 13 months.

If you have kept a retail or industry fund open with small balances to retain insurances you may need to put a small annual contribution in place (I would recommend $100 per half year just in case) to ensure it does not get tagged as dormant.

Older Australian package

The Government introduced the following measures to enhance the standard of living older Australians:

• Increase to the Pension Work Bonus from $250 to $300 per fortnight.

• Amendments to the pension means test rules to encourage the take up of lifetime retirement income products.

• Expansion of the Pensions Loan Scheme to allow more Australians to use the equity in their homes to increase their incomes.

I think this will be a major bonus for those with a lumpy asset or shareholding’s they wish to retain but need more cashflow. At a current rate of 5.25% the Pensions Loan Scheme is a very decent rate and security that you are borrowing from a bank or predatory lender based on a brokers conflicted commissions.

Personal income tax bracket changes (take most these with a pinch of salt!)

The Government has provided personal income tax relief to lower and middle income earners. A Low and Middle Income Tax Offset will now be available for individuals with incomes of up to $125,333.

The $87,000 income threshold, above which a 37 per cent tax rate applies, will increase to $90,000.

Other changes

• A surplus of $2.2 billion is expected in 2019-20, one year ahead of schedule.

• The Government’s planned increase in the Medicare levy from 2 per cent to 2.5 per cent, to fund the National Disability Insurance Scheme, will now not go ahead due to increased tax revenues.

How can we help?

Some of these measures may open up strategy options for you and your family.

If you have any questions or would like further clarification in regards to any of the above measures outlined in the 2018-19 Federal Budget, please feel free to give me a call or email to arrange a time to meet or talk by phone so that we can discuss your particular requirements in more detail.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

There are many rumours and well-intentioned but wrong advice out here on the internet about how to maximise Centrelink or DVA pension by “gifting assets” before applying. I want to clear up some of those misunderstandings

The gifting and deprivation rules prevent you from giving away assets or income over a certain level in order to increase age pension and allowance entitlements. For Centrelink and Department of Veteran’s Affairs (DVA) purposes, gifts made in excess of certain amounts are treated as an asset and subject to the deeming provisions for a period of 5 years from disposal.

Acknowledgement: I have relied on the excellent guidance of the AMP TAPin team for the majority of the content in this article. They write great technical articles for advisors and I try and make them SMSF trustee friendly.

What is considered a gift for Centrelink purposes?

For deprivation provisions to apply, it must be shown that a person has destroyed or diminished the value of an asset, income or a source of income.

A person disposes of an asset or income when they:
− engage in a course of conduct that destroys, disposes of or diminishes the value of their assets or income, and
− do not receive adequate financial consideration in exchange for the asset or income.

Adequate financial consideration can be accepted when the amount received reasonably equates to the market value of the asset. It may be necessary to obtain an independent market valuation to support your estimated value or transferred value or Centrelink may use their own resources to do so..

Deprivation also applies where the asset gifted does not actually count under the assets test. For example, unless the ‘granny flat’ provisions apply, deprivation is assessed if a person does not receive adequate financial consideration when they:

− transfer the legal title of their principal home to another person, or
− buy a new principal home in another person’s name.

What are the gifting limits?

The gifting rules do not prevent a person from making a gift to another person. Rather, they cap the amount by which a gift will reduce a person’s assessable income and assets, thereby increasing social security entitlements.

There are two gifting limits.

A person or a couple can dispose of assets of up to $10 000 each financial year. This $10, 000 limit applies to a single person or to the combined amounts gifted by a couple, and

An additional disposal limit of $30 000 over a five financial years rolling period.

The $10,000 and $30,000 limits apply together. That is, although people can continue to gift assets of up to $10 000 per financial year without penalty, they need to take care not to exceed the gifting free limit of $30 000 in a rolling five-year period.

What happens if the gifting limits are exceeded?
If the gifting limits are breached, the amount in excess of the gifting limit is considered to be a deprived asset of the person and/or their spouse.

The deprived amount is then assessed as an asset for 5 anniversary years from the date of gift. It is assessed as an asset for asset test purposes and subject to deeming under the income test.
After the expiration of the 5 year period, the deprived amount is neither considered to be a person’s asset nor deemed.

Example 1: Single pensioner – gifts not impacted by deprivation rules

Sally, a single pensioner, has financial assets valued at $275,000. She has decided to gift some money to her son to improve his financial situation. Her plan for gifting is as follows:

Financial year

2017/18

2018/19

2019/20

2020/21

2021/22

2022/23

Amount gifted

$6,000

$6,000

$6,000

$6,000

$6,000

$6,000

With this gifting plan, Sally is not affected by either gifting rule. This is because she has kept under the $10,000 in a single year rule and also within the $30,000 per rolling five-year period.

Example 2: Single pension – Gifts impacted by both gifting rules

Peter is eligible for the Age Pension. He has given away the following amounts:

Financial year

Amount gifted

Deprived asset assessed using the $10,000 in a financial year free area rule

Deprived asset assessed using the $30,000 five-year free area rule

2017/18

$33,000

$23,000

$0

2018/19

$2,000

$0

$0

In this case, $23,000 of the $33,000 given away in 2017/18 exceeds the gifting limit (the first limit of $10,000) for that financial year, so it will continue to be treated as an asset and subject to deeming for five years.
In 2018/19, while gifts totalling $35,000 have been made, no deprived asset is assessed under the five-year rule after taking into account the deprived assets already assessed, ie $33,000 + $2,000 – $23,000 = $12,000, which is less than the relevant limit of $30,000.

Example 3: Couple impacted by both gifting rules

Ted and Alice are eligible for the Age Pension. They give away the following amounts:

Financial year

Amount gifted

Deprived asset assessed using the $10,000 in a financial year free area rule

Deprived asset assessed using the $30,000 five-year free area rule

2017/18

$10,000

$0

$0

2018/19

$13,000

$3,000

$0

2019/20

$10,000

$0

$0

2020/21

$10,000

$0

$10,000

2021/22

Any gifts in 2014/15 will be assessed as deprived assets under the five-year rule

In this case, $3,000 of the $13,000 given away in 2018/19 exceeds the gifting limit for that year, so it will continue to be treated as an asset and subject to deeming for five years. The $10,000 given away in 2020/21 exceeds the $30,000 limit for the five-year period commencing on 1 July 2017, so it will also continue to be treated as an asset and subject to deeming for five years.

Are some gifts exempt from the rules?

Certain gifts can be made without triggering the gifting provisions. Broadly speaking, these include:
− Assets transferred between the members of a couple. A common example is where a person who has reached Age Pension age withdraws money from their superannuation and contributes it to a superannuation account in the name of the spouse who has not yet reached age pension age.
− Certain gifts made by a family member or a certain close relative to a Special Disability Trust. For more information on Special Disability Trusts, refer to Department of Human Services – Special Disability Trusts.
− Assets given or construction costs paid for a ‘granny flat’ interest. See Department of Human Services – Granny Flat Interest for further detail.

Trying to be too smart – Gifting prior to claim

Contrary to what many read on the internet any amounts gifted in the five years prior to accessing the Age Pension or other allowance are subject to the gifting rules

Deprivation provisions do not apply when a person has disposed of an asset within the five years prior to accessing the Age Pension or other allowance but could not reasonably have expected to become qualified for payment. For example, a person qualifies for a social security entitlement after unexpected death of a partner or job loss.

Gifting and deceased estates

The gifting rules apply to a person’s interest in a deceased estate if the person does any of the following:

− Gives away their right to their interest in a deceased estate for no/inadequate consideration,
− Directs the executor to distribute their interest in a deceased estate for no/inadequate consideration, or
− After the estate has been finalised, gives away their interest in a deceased estate to a third-party for no/inadequate consideration.
The above rules apply even if the deceased died without a will.

Gifting and death of a partner
In some circumstances, couples in receipt of a social security benefit may give away assets prior to death of one of them. Prior to death, any deprived assets would have been assessed against the pensioner couple for five years from the date of the disposal. Now that a member of the couple has passed away, how will the deprived assets be assessed for the surviving partner?
The amount of deprivation that continues to be held against a surviving partner depends on who legally owned the assets prior to death.

Table 1: Gifting and death of a partner

Legal owner of the deprived asset

Assessment of deprived assets

jointly,

does not change.

by the deceased partner,

is reduced to zero.

by the surviving partner,

increases by the amount held against the deceased partner by the outstanding balance held against the deceased partner.

Example 4: Death of a partner

Daryl (age 84) and Gail (age 78) gifted an apartment worth $260,000 to their son Ethan on 1 July 2019. At the time the gift was made, Centrelink assessed $250,000 as a deprived asset. Daryl passed away on 1 July 2020.
The treatment of the deprived assets for Gail will depend on who legally owned the assets prior to Daryl’s death. The impact of different ownership options is shown below:

Legal owner of the deprived asset

Assessment of deprived assets

jointly,

Half of the asset value of the deprived asset will be assessed against the surviving spouse. As the amount of the deprived asset is $250,000, only $125,000 will be assessed against Gail

by the deceased partner,

No amount will be assessed against the surviving partner. As the amount of the deprived asset is $250,000, the amount assessable to Gail is $0.

by the surviving partner,

The full amount will continue to be assessed against the surviving partner. As the amount of the deprived asset is $250,000, the amount assessable to Gail remains at $250,000.

Want a Centrelink Review or are you just looking for an adviser that will keep you up to date and provide guidance and tips like in this blog? Then why not contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options. Do it! make this the year to get organised or it will be 2028 before you know it.

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This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

There are all sorts of unexpected consequences coming out of the changes to the superannuation rules. As a result of moving funds over $1.6m back to accumulation to meet the Transfer Balance Cap (TBC), you may in fact now qualify for the Commonwealth Seniors Health Care card.

How?

There may be a silver lining to the new $1.6 million transfer balance cap (TBC) for some SMSF members. Having less money in an account based pension and more money in accumulation or other assets may result in some SMSF members being entitled to receive the Commonwealth Seniors Health Card (CSHC). This is because amounts held in accumulation phase are not deemed for the CSHC and are not included in a member’s personal taxable income.

Now if the excess over the $1.6m is/was withdrawn out of superannuation, whether it will count as income for the CHSC will depend on how the client invests it. for example financial investments such as shares, rented investment property and interest will be deemed but a Holiday home not rented out will not be deemed towards the CSHC income test.

Older pensions may be even more forgiving!

Income from an account based pension is deemed under the usual Centrelink deeming rates unless the account based pension commenced before 1 January 2015, and the client was entitled to the card before 1 January 2015 and continues to hold the card. This is known as the grandfathering rules.

For SMSF members who are not eligible for the grandfathering rules, holding a significant amount of money in an account based pension means that they have a lower likelihood of being eligible for a CSHC. Prior to 1 July 2017, for most SMSF members it was more beneficial to hold as much as possible in an account based pension for tax purposes even if this meant they were ineligible for the CSHC. The tax savings on the excess would have outstripped the CSHC benefit.

However, from 1 July 2017, SMSF members can only hold up to $1.6 million in an account based pension and if they are also receiving defined benefit pension income the amount which can be held in account based pensions will be lower. Depending on other income the member receives, this may result in them now being entitled to the CSHC.

You don’t believe me? The following example explains how this works in a simple scenario:

Example – single person

James is single and is age 67. In the 2016 -2017 financial year, he had $2 million in his account based pension, and no other income.

The deemed income from his account based pension is calculated as $64,247 based on deeming rates and thresholds as at 1 July 2017. His deemed income exceeds the income threshold of $52,796 for the CSHC and therefore he is not entitled to a CSHC.

On 30 June 2017, he rolls $400,000 back to accumulation leaving $1.6million in his account based pension.

The deemed income on $1.6 million is $51,247 and is under the income threshold of $52,796 (20 March 2017) meaning that James is entitled to a CSHC after rolling back money from his account based pension to accumulation.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

We are finally seeing the SMSF sector being recognised as the retirement option of preference for engaged investors. Fees and costs are constantly being addressed but what trustees and members need is more confidence in running their funds and that comes through informative content and education.

The industry and the regulator have stepped up a notch in terms of engagement and producing news and educational content for people who want to be active in controlling their future and open to learning more about managing their finances.

Just look at the new content provided by the ATO this year:

For Trustees :

The ATO released 22 short, educational, and entertaining videos, to help you navigate a wide range of events including retirement planning, investment decisions and running an SMSF. We will release more videos next year, covering new topics to help you run your SMSF smoothly and better understand your obligations.

To help people search their website for relevant SMSF information they launched SMSF assist External Link . To use SMSF assist, type in a question or select a topic to get specific information in an instant. SMSF assist and other SMSF services have been added to the ATO app.

News articles, practical case studies and Q&As are now published as they become available and can be accessed anytime through ‘News’ on the left-hand side menu of the SMSF home page.

The ATO quarterly FREE subscription service ‘SMSF News’ has a fresh look and feel, and from 2015 will be issued on a bi-monthly basis.

They will run webinars in 2015 covering different topics for trustees and professionals.

For professionals (in addition to the above services):

The ATO began engaging with SMSF professionals through a live LinkedIn question and answer event hosted by Deputy Commissioner Alison Lendon. The event created dialogue with participants, and we answered SMSF-related questions during the forum.

Building on the success of the LinkedIn forum, they embarked on a series of webinars aimed at SMSF professionals. The webinars highlighted current issues facing the industry and provided an opportunity for participants to ask questions.

Other New Initiatives:

To help you better understand your role as a SMSF trustee the SMSF Association has launched a free online resource.

By completing this course, you will have learnt;

The basic facts about Superannuation and Self-Managed Superannuation Funds

How an SMSF works

The investment rules for SMSFs

The administration process to keep your SMSF healthy.

If want a source of constantly updated new on what is relevant to SMSFs then you can get subscribe free to The #SMSF News which picks up most relevant SMSF articles across the web daily. Also if you are on Twitter make sure to follow us as @SMSFCoach and subscribe to this blog up on the left hand column.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

The information in this article is provided for illustrative purposes only and does not take into consideration your personal circumstances. You are encouraged to seek financial advice suitable to your circumstances to avoid a decision that is not appropriate. Any reference to your actual circumstances is coincidental. Genesys and its representatives receive fees and brokerage from the provision of financial advice or placement of financial products.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

Many SMSF investors are confident with shares, property and term deposits but when it comes to bonds they are feel like they hit a brick wall when they look for solid reasons to consider this sector.

I found this series of articles from Elizabeth Moran that looks at some of the myths around bonds and addresses them in detail. The series addresses the key concerns that SMSF investors mention to me when suggest a potential investment in a bond issue or bond fund. Most of the concerns are based on misinformation on the web and false rules of thumb. So, if you would like to learn more about bonds, this series of articles which looks at the “Seven Key Myths” is a good starting point.

Subscribe to the SMSF Coach blog on the left hand column so that you don’t miss out educational articles like this.

As a thank you to FIIG I will also add a link to their SMSF Solutions page (Not a paid endorsement just a recognition of a good effort)

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

The Australian Taxation Office (ATO) on the 17th November 2014 confirmed that new regulations which came into effect on 1 July 2014 do not permit new insurance products acquired on or after 1 July 2014 to be used as part of a cross-insurance arrangement. This was a common strategy used to protect SMSFs engaging in Limited Recourse Borrowing Arrangements from being forced to sell a property if a member of the fund died or became disabled.

Insurance strategy rejected

The ATO confirmed that these types of arrangements are not permitted under the new rules as “the insured benefit will not be consistent with a condition of release in respect of the member receiving the benefit”.

Impact on SMSFs with existing cross-insurance arrangements

Where a trustee acquired insurance products prior to 1 July 2014 to implement a cross-insurance strategy, the ATO’s announcement seems to imply that those arrangements will continue to be permitted as those policies would be grandfathered and therefore exempt from the new regulations.

According to Colonial First State’s FirstTech team, where a trustee acquired a new policy to implement a cross-insurance strategy on or after 1 July 2014, the new rules will apply and the trustee will need to restructure their fund’s insurance arrangements in consequence of the ATO’s announcement. In this case, trustees may wish to contact the fund’s auditor or seek legal advice to confirm their options.

SMSF Trustees may wish to seek SMSF specific advice from the ATO before proceeding with any other debt reduction and liquidity strategies

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

I have made it very clear for many years that I believe that it’s much better for a self-managed super fund to use a corporate trustee rather than individual trustees. Yes there is an initial set up fee of between $550 to $850 including and ASIC charge of $488 but that is a one-off and I would hope that ASIC in a move to promote use of Sole Purpose Corporate Trustees might reduce that fee. (wishful thinking maybe).

ASIC also charges these companies annual fees. They have two different charges for proprietary limited companies. One applies to companies that only perform a special purpose and another charge applies to all other companies.

Special-purpose companies include those whose sole function is to be the trustee of a super fund regulated under the laws. These types of super funds would include SMSFs.

Special-purpose companies are only charged an annual fee of $53 (up from $48 just last year – inflation!).

The annual fee for all other proprietary limited companies is $263. As an example, this higher fee applies to companies that at are a trustee of an SMSF and also trustee of your family’s discretionary trust.

Because people often use their Accountant or Administrator as a mailing address it can be easy for these annual fees to be missed or a delay to occur in notifying people to pay them . So for people who are a bit lax about checking emails or opening snail mail from their fund administrator it’s very easy to miss the deadline to pay these annual ASIC fees.

If any company pays its annual ASIC fee more than a month late the late payment fee is $79 and if two months past the deadline date it will have to pay an additional $329.

I have a number of clients who have been caught in this trap and went looking for a solution. To avoid these penalties all annual ASIC fees can be paid 10 years in advance and obtain a decent discount and peace of mind that late fees are avoided.

For example, the fee for 10 years in advance for a super fund trustee company is $370, a discount of $160 on 10 years of the standard $53 annual fee for SMSF trustee companies. This discount is equivalent to a 30% discount per year. Sounds like a good deal for a forgetful, busy or even the prudent trustee.

The relevant instructions on how to pay and the require form are available here.

Note for Accountants and Administrators:

Best practice treatment of the payment is to amortise over 10 years.

In Class you can set it up as a Custom Holding asset (non-investment) and amortise 1/10th every 30 June (or company review date if that’s your preference).

in BGL SF360, you can use the existing 66000 Prepaid Expenses account in the Chart of Accounts or create a Custom Asset Account e.g. Prepaid ASIC Fees. Then amortise the ASIC fees over the prepaid period i.e 10 years. Users can refer to https://360help.com.au/x/NgNiAQ

In BGL SF360 as an extra time saver, use the SAVE & COPY function in the Journal Screen each year to copy the Journal. SF Desktop clients could use the Standing Journal function.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

Following on from my previous article How a SMSF can Purchase a Property with a Related Party – Using a 13.22c Trust , another strategy for those wishing to engage in property development with their SMSF involvement is for the fund trustee to invest in a unit trust that holds the development land / existing property by subscribing for units in the unit trust with partners so that no related entity group owns more than 50% of the units in the trust.

Where the fund trustee invests in an unrelated trust the trustee for the unit trust is not required to comply with the requirements of regulation 13.22C of the SIS Regulations. This means that the trustee for the unit trust can borrow to fund the land development without the fund trustee breaching the in-house asset rules in s71 of the SIS Act.

To make it very clear the unit trust will be unrelated if the fund trustee and its associates do not:

exercise Sufficient Influence; or

have a fixed entitlement to more than 50% of the income and capital of the unit trust; or

have the power to remove or appoint the trustee for the unit trust.

So each SMSF or related group of investors can own exactly 50% in combination between them and still maintain an unrelated trust and meet the above requirements.

Keep it simple as it is important that the units in the unit trust carry equal rights to income and capital so that you do not also trigger the non arm’s length income provisions under s295-550 of the Income Tax Assessment Act 1997 (1997 Act).

The diagram below shows 2 unrelated Self Managed Superannuation Funds investing in a unit trust equally (50/50) to carry out a property development. One of the SMSFs uses as related party loan to fund their purchase of the units. Remember it is only the units that are offered as security not the property in the trust.

Each SMSF contributes $350,000 and the property is developed for a total cost of $700,000 and sold for $1m. The$300,000 profit flow back through the Unit Trust to the unit holders equally.

Sufficient Influence

Where two unrelated SMSFs each hold 50% of the units in the unit trust, it is important that the trust management decisions are decided on a 50/50 basis. It should be very clear from documentation and minutes of the trust that decisions are made jointly.

How to avoid distributions to the SMSF being treated as non-arm’s length income?

Where the SMSF invests by way of a unit trust structure, any income received by the fund trustee may be treated as non arm’s length income and taxed at 47% under s295-550(5) of the Income Tax Assessment Act 1997 (1997 Act), where:

the parties are not dealing at arm’s length terms; and

the fund trustee receives an amount it would not otherwise have received if the parties were dealing on arm’s length terms.

Similarly, income the SMSF derives as a beneficiary of the trust, other than because of a fixed entitlement to income, will be treated as non arm’s length income and taxed at 47%.

Therefore, it is important to ensure that the unit trust is a fixed trust, meaning that the entitlement of unit holders to receive income and/or capital from the unit trust is fixed and indefeasible. However, even with a fixed trust it is necessary for the income to be no more than the income that would have been derived if the parties were dealing with each other at arms-length (s295-550(5)).

Managing powers of trustee appointment or removal

Again to avoid falling foul of the legislation, the constitution of the trustee company of the unit trust should be designed to ensure that the SMSF trustee and/or its associates do not have the power to control the trustee by effectively having the power to appoint and remove the trustee for the unit trust by reason that they hold a majority of the shares in the trustee. One trap is a constitution that allows the chairperson to have a casting vote where the chairperson is a SMSF Trustee or representative of the SMSF trustee.

Documentation

When the transaction is structured by way of an unrelated unit trust arrangement, the following documents should be prepared by an experienced legal expert (not off the shelf):

unit holders’ agreement all ensuring none of the requirements breached..

Gradual acquisitions of more units by the SMSF

Where a fund trustee invests in an unrelated unit trust the fund trustee may acquire the units held by the other party over time, subject to complying with the provisions of the SIS Act and keeping their related entity group to less than 50% of the overall trust units. Keep in mind that where the unit trust is land rich, there may be a corresponding stamp duty liability and there may be capital gains tax implications for the initial owner as well as valuation fees at each transaction date.

Remember the Sole Purpose Test

In the zest for undertaking any strategy I always remind clients about the reason for undertaking any investment. Your aim should be to provide for a better retirement. If that is not the core purpose then you are breaching the sole purpose test and should reconsider the whole strategy. Also you must review or amend your fund’s investment strategy to ensure this investment falsl within it’s guidelines..

Important information (emphasised for use of this material):

The information in this article is provided for illustrative purposes only and does not take into consideration your personal circumstances. You are encouraged to seek financial, tax and legal advice suitable to your circumstances to avoid a decision that is not appropriate. Any reference to your actual circumstances is coincidental. Magnitude, Verante and its representatives receive fees from the provision of financial advice.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

The Australian Tax Office (ATO) has launched a great selection of short educational videos dealing on all matters to do with self-managed superannuation funds (SMSFs). The short animated videos are only 2 -3 minutes each and cover topical subjects as well as key responsibilities for SMSF trustees in an easy to understand format.

The headline for each video contains a link that will take you to the appropriate Tax Office web page, which also publishes the full transcript of the contents of each video if you prefer reading.

This video deals with how SMSFs (or as they used to be known, “do-it-yourself” or DIY super funds) are not really very DIY at all. The video introduces the different people an SMSF trustee will have to work with, or who can help trustees meet their obligations.

Investments

Video currently being updated by ATO
Learn more about the sole purpose test and what it means to your SMSF investments.

Your SMSF needs to meet the sole purpose test to be eligible for the tax concessions normally available to super funds. This means your fund needs to be maintained for the sole purpose of providing retirement benefits to your members, or to their dependants if a member dies before retirement.

Contravening the sole purpose test is very serious. In addition to the fund losing its concessional tax treatment, trustees could face civil and criminal penalties.

It’s likely your fund will not meet the sole purpose test if you or anyone else, directly or indirectly, obtains a financial benefit when making investment decisions and arrangements (other than increasing the return to your fund).

When investing in collectables such as art or wine, you need to make sure that SMSF members don’t have use of, or access to, the assets of the SMSF.

Your fund fails the sole purpose test if it provides a pre-retirement benefit to someone – for example, personal use of a fund asset.

SMSF investment strategy
Your SMSF’s investment strategy is the framework that guides your investment decisions. It pays to have a good investment strategy that is regularly reviewed. Learn what factors your SMSF’s investment strategy needs to take into account.

Watch this video to learn how tax applies when you pay benefits from your SMSF.

Being updated by ATO

SMSF – arm’s length
All SMSF transactions must be on an arm’s-length basis. This means that fund assets must be bought and sold at market value, and income on the assets should show a true market rate of return.

Here the ATO have focused on SMSF loans and early access, with the perceived problem being that people mistakenly think that an SMSF can provide them with a loan, or that they can access their super savings whenever they like.

Thinking about winding up your SMSF? Here are some common reasons for winding up and the steps to follow to get it done.

I will keep this list updated as more videos are released

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

Our copy of our Financial Services guide can be obtained by visiting our main www.verante.com.au website.

Get back in control of your finances now. The first step is to actually sit down (with your partner if you have one) and list out your assets and liabilities and work out what you are actually saving *or not) at present. Understand how you are financing your current lifestyle and then think about what sort of lifestyle you want in the future. If you are borrowing for todays lifestyle then you have little chance of funding the same standards in retirement.

Get out of debt. One of the hardest things about debt is that it feels so overwhelming. The reality is you can’t ignore it and you know deep down that delaying the inevitable only piles on more trouble. Better just to take on your debt and get through it often starting with the high interest rated debt first. A great place to start is the Managing Debt section of the Money Smart government website.

Look to transition to retirement rather than pulling the plug. See if you can extend your savings by working part-time or doing some contract work during the year. Every dollar you earn means a dollar saved from your retirement fund. More and more people are opting to cut back to 4 then 3 days before finally retiring rather than the traditional retirement strategy of working full-time until the day you retire. ask about using a combined Transition to retirement and Salary Sacrificing strategy to boost your retirement savings.

Find a trusted financial adviser. A fee for service financial planner who is recommended to you by someone you know and trust can help you plan for retirement and make the most of your resources in ways you might not have anticipated. Often using the superannuation , tax and social security systems can add as much value as the return on the investments. you may look at consolidating your superannuation, moving investments in to a lower-income earner’s name, leveraging the equity in your home or investments or taking more control of your future using a Self Managed Super fund or a Member Directed Option in your industry or retail fund.

Don’t dip in to your super.Just because you reach preservation age you should not be tempted to dip into your retirement savings. You can use strategies like Transition to Retirement pensions combined with Salary Sacrifice to actually receive the same take home income but in a more tax effective way and also better after tax returns on your savings.

Think twice before indulging the kids.High property prices , unemployment and career breaks to start a family have made it hard for many in their 20s and 30s to get an independent head start, and many families are getting through tough times by living together. But too many parents are giving adult children financial support for house deposits, new cars, medical and school bills and worse still spending money. This is teaching them nothing about saving and parents need to teach life lessons not be their children’s best mate! This financial assistance without teaching about saving and budgeting may be undermining their children’s ability to ever become independent. It also may be dooming parents’ retirement. The kids have more time than you do to make up financial losses. Get your own retirement funding in order before splashing out on the children. Set rules, limits and targets for them and make a loving, firm plan teaching them how to budget and reduce the siphoning from the bank of Mum and Dad while giving wholehearted support in non-financial ways.

Save more and save smarter. Follow the basic rules for retirement savings, including minimising taxes, working longer, investing regularly and keeping on top of your investments. Boost savings by every cent you can and pre-tax if possible Keep increasing your salary sacrifice contributions to meet your retirement goal. Don’t have a goal? Use the Money Smart retirement planner calculators to decide how much you’ll need and what to save to get there.

Don’t touch the equity in your home unless it is adding income. If your retirement is looking shaky, don’t even consider using home equity for non-essentials like renovations or as new car. Use the equity to build wealth rather than destroying it. Talk to a financial planner for strategies and then your accountant to confirm tax consequences when using the equity in your home to work for your retirement. Educate yourself on the pros and cons of any investment so you are comfortable with the strategies as that provides the Sleep factor!.

Plan for the unforeseen and protect your greatest asset.Plan for the unexpected and don’t wait until you’re in trouble to take action. Insurances are an essential part of any long-term plan and your earning capacity is your biggest asset so protect it. See the warning lights. If you’re struggling with mortgage repayments and debt now, even if you want badly to stay in your home, start right away to figure out a fall back plan if you cannot. Pride can prevent you from taking needed action when you’re in trouble. Don’t spend retirement savings or home equity trying to repay unmanageable debt.

what about number 10? Well that’s up to you , let me know what are you doing to rescue your retirement? Just comment blow, you never know who or how many people your idea may help.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

Our copy of our Financial Services guide can be obtained by visiting our main www.verante.com.au website.

Regardless how old you are now, it’s likely you will have a tougher time managing a financially secure retirement than your parents. There is an old saying that “the best time to plant a tree was 20 years ago, the second best time is now!” .

Struggle to Save

Most people just are not putting away enough to fund their retirement or aren’t saving regularly. However the goal posts are also moving and that makes it a bigger task for pre-retirees to plan for and achieve a comfortable lifestyle once they retire

1. We’re living longer.

The proportion of the population aged 65 years or more will increase from around one in seven Australians in 2012 to one in four Australians by 2060, and close to 1 in 3.5 at the turn of the next century[i]

In 1960, a 65-year-old male would live on average another 12 years. Today, according to the Australian Bureau of Statistics (ABS) the average man at 65 can expect to live another 19 years. The average woman will get 22 more years.[ii]

Living an extra 7 years without working takes a lot more savings and better budgeting. Remember these are averages so If there is a history of longevity in your family your retirement savings may need to stretch 30 years or more.

2. Older workers lost out in the GFC. While Australia escaped most of the hurt in the GFC, many companies cut back staff and let go older employees who have failed to find new work opportunities and therefore the earning power from men and women in their late 50s and 60s has been stifled.

Investment savings also plummeted, affecting people of all ages but older Australians have less time to make up those losses by making additional savings or share portfolios recovering over time. The ASX 200 is still below 5400 having dropped during the GFC from 6840

3. Age Pensions are coming under pressure. The increase of the pension access age and the change to the indexing of pensions by CPI rather than average wages as well as the reduction in asset test of thresholds mean that access to the part-pension will be tougher in future years meaning using up more of your own capital earlier.

4. Interest rates are low and look to be lower for longer. Retirees in previous generations earned fairly consistent higher interest on savings and low-risk investments. Today’s retirees must take risks in search of income or endure historically 40 year low fixed-income returns. Five years ago you could get Term Deposits paying 7.5% and now you are lucky to get more than 2.5%

5. People are carrying more debt in to retirement. The standard Aussie family always tried to enter retirement without a mortgage on their home. That’s harder to achieve today. It is common now to see older Australian’s dipping into their superannuation to pay off the mortgage on retirement and more are finding they are increasingly accessing credit card debt and personal loans to fund one-off purchases.

6.We’re working longer. Australians’ average age at retirement is creeping up. The ABS advise that the average retirement age for those who retired within the past five years was 63 for men and 59 for women.[iii].

The upward trend in retirement ages is confirmed in the figures measuring the expectations of those aged 45 and older – around two-thirds intend to retire at or over 65 years of age, with 17 per cent expecting to work until they are 70 or older.

A quarter of workers expect to finish work between 60 and 64 years of age, while only 9 per cent expect to retire before they are 60. But poor health, job loss and the need to care for older parents, grandchildren and ill spouses can cut that short.

7. Rise in Grey Divorce means more retirees are single. Divorce is rising among older Australians, and women tend to outlive their husbands. More than half of retired women in Australia are living in households where the annual income is less than $30,000 with divorced and widowed women among the worst off, according to 2011 research – conducted by the Australian Institute of Superannuation Trustees (AIST). It costs more for a single person to support a household than to share overhead.

Have I shattered your dream or jolted you back to reality? there is no use in pointing our the problems without offering some solutions so check out this post where I outline 10tips for salvaging that retirement dream.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

The declaration aims to ensure that new trustees understand their obligations and responsibilities.

The declaration lists key matters that you must understand in order to effectively manage an SMSF, including information about:

the sole purpose test

trustee duties

investment restrictions

record-keeping, reporting and lodgement obligations

Watch this video from the ATO for a little more detail then read on below.

I recommend that all new Self Managed Superannuation Fund Trustees complete a short FREE online course about their duties before signing this document. the course is available here at www.smsftrustee.com and yes it is really free with no obligations.

You even get a nice little certificate to put on file once completed. It’s not rocket science but it will clarify how important it is to be aware of your obligations as Trustee of your own fund.

Remember you must complete this compulsory declaration if you become a new trustee (or director of a corporate trustee) of:

a new self-managed super fund (SMSF)

an existing SMSF.

You must sign this declaration within 21 days of becoming a trustee or director of a corporate trustee of an SMSF.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

Not sure who to trust for information about setting up and running an SMSF. Well I hope after following my blog for a while you will trust me but I know that takes time so your first port of call might be the regulator for self managed super funds , the ATO.

They have lots of webinars that you can attend live, download a recording to listen at your pleasure or if you prefer to read you can download the transcript.

SMSF trustees

Note: there are no live sessions currently scheduled for these webinars.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

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We understand that the financial industry is full of jargon and concepts that can be difficult for people to get their head around or remember. So to learn more about money and finance at our Financial Knowledge Centre is a great place to start.